Debunking Liam Fox’s post-Brexit Commonwealth trading block

The speculation over the nature of EU trade post-Brexit has been wide, varied, and often contradictory. Ranging from all-out access to the EU’s single market, to more daunting no-deal scenarios. In an attempt to sure-up some type of positivity about British exports, many senior government officials have set their targets for new trade deals to outside of the EU-28. With an aim to mitigate any potential impact to UK trade. Most notably Liam Fox, Secretary of State for International Trade, who has looked into the past rather than the future so solve the issues of post-Brexit Britain.

Dubbed Empire 2.0, Fox wants to rekindle relationships with the old colonies to increase trade and importantly for the economy: Exports[1]. While I personally prefer ‘The Empire Strikes Back’ both as name and as a narrative comparison for this plan, it has certainly been a focus for Fox’s department. The Department for International Trade (DIT) modus operandi is to look for new potential trade agreements for far away Commonwealth countries to replace the lost European markets if negotiations go terribly, terribly wrong.

Unfortunately, while the rhetoric sounds grand, it’s a bunch of complete drivel. Drawn up from the notes of a history lesson on the “grand British Empire” from the 1950’s, as opposed to the modern workings of international trading markets. This post isn’t against the idea of a Commonwealth trading block (trade is good), but instead acts to counter the faulty logic that so many people have put their hopes on in the assumption that “the UK will be just fine, or better!!”.

The current trend doesn’t match the rhetoric

So here are some facts. Firstly, commonwealth countries don’t buy that many UK products in the grand scheme of things. Below is an interactive map I created using 2015 ONS data, and modelled into Tableau. The more red the country, the more exports they buy from the UK.

While the UK’s export market quite diverse, but by no means does any commonwealth country come in the top 5 of the UK’s current export markets. Focus on Commonwealth countries with the biggest GDP’s: India, Canada, Austria, & South Africa. Markets which the UK would really need strong existing trade links with in order for Fox’s plan to be feasible. Yet, the exports to these countries are simply not high enough to support Fox’s projected expectations.

The reason for this is actually incredibly simple, “if you double the distance between the two countries, you’ll basically half the trade”. This is called the Gravity Equation in international Trade (see paper here: http://publications.ut-capitole.fr/15395/1/distance.pdf). Basically, world trade is dependent on communication, speed, and transport links between countries, which is extremely difficult when the country you wish to trade with is half way across the world.

*ring ring* Is that reality calling? No it’s Liam Fox waking up an Australian at half 3 in the morning trying to shift some sausages

In summary, the first issue here when we look at our map is that the important Commonwealth counties are too far away to support trade on the level we have with our current EU partners. The transportation of goods would be too costly to be efficient. Anyhow, Commonwealth countries are closer to upcoming BRIC countries. In most instances, there are other countries that are much more important for their economic futures, and more importantly, geographically closer than the UK.

Ok, says Liam Fox, who has argued that we are now in a “post-geography trading world” (this tag-line was from the same slogan department as the ‘red, white, and blue Brexit?’ I bet it bloody was) and that the services industry, in which trade of financial and digital products is now borderless and instant. The dream of a commonwealth trading block might be saved by technology.

Unfortunately, this is also bollocks.

In 2015, UK exports within the service industries amounted to £229,862m. This is made up of 12 industries, only four of these can be identified as “post-geographical” (cringe): Insurance & pensions; Financial; Intellectual Property; and Telecommunications, Computers & IT services. Which make up £98,976m (Only 43% of the total service industry). But here is the real kicker, the major importer of our post-geographical services are EU nations (£45,258m) followed by the US (£22,625m). If Liam Fox’s plan was to work, countries such as India (£673m), South Africa (£873m), & Australia (£1,105m) would need to be heavy importers of these goods. But nope.

Indeed, when we look at countries who are purchasing UK post-geographical (cringe) products, the familiar pattern returns. Lots of far away importers.

Tackling the rhetoric on the Commonwealth trading block

So where is this rhetoric about the magic rise of a Commonwealth trading block as a like-for-like replacement for EU trade coming from? The idea has been lingering around by euro-sceptics for decades, but this writing by Ruth Lea, a prominent Eurosceptic campaigner, on the Conservative Home website is quite telling. Analysing the text, we can find two key themes:

Rhetorical Patriotism & antiquated mind-set: The grand old days have always been home to those who see themselves as traditional patriots. Pax Britannia, stiff upper lips, the pragmatic mind-set may not be present in Ruth’s particular text. But the underlying assumption that Commonwealth countries have a shared common goals under the soft-power leadership of their former colonial master is quite dated. It’s almost assumed by the likes of Liam Fox that Commonwealth countries automatically want trade with the UK.

A Preference for Strong Food The Lion (1929). Credit -National Archives of Australia/Wikimedia

The truth is quite the opposite – take for example the Commonwealth Heads of Government Meeting in 2011, and the proposal for the Eminent Persons Group report, calling for the 54 nation body to improve human rights – rejected by South Africa, Namibia, and India on fears of “imperial overtones”.[2] evidence that these countries won’t blindly follow the UK into an agreement. They have their own agendas, and most importantly, they are fully autonomous countries with their own will. It goes further than that, the voting records by the countries within the U.N signify that the Commonwealth isn’t any type of meaningful political grouping on the world stage. Instead, the voting records would indicate that Commonwealth countries will vote along the more traditional North-South divide. In short, it’s taken for granted in the inferences of the rhetoric used that Commonwealth states are in some way subservient, as if the history and GDP rankings are the sole measures of international soft power. Or that they see the world through red, white, and blue glasses. I’m sure when negations start they will be in to a shock.

The second is the blame game: It’s the EU’s fault that the UK doesn’t already have these deals. My only answer to that is simple. One, the EU granted the UK access to 1/3 of the worlds markets by value. Two, the EU additionally granted the UK access to 50 other countries outside of the EU, this already includes some Commonwealth states such as South Africa. Through the EU’s additional deals that are currently in the works, we would be granted access to an even broader global market. If Liam Fox can do better than that, well, I’d eat my PhD thesis (when that’s done).

All-in-all, the notion of a grand Commonwealth trading block under the leadership of Britain looks unfeasible in two key ways. Firstly, there is little evidence to suggest trade with the Commonwealth will magically arise to meet the gap caused by Brexit. Secondly, there is the assumption that these countries want a trading deal with the UK as Liam Fox envisages. So when you here people cry for joy at the notion, here is some evidence that should keep you a little skeptic.